Peak Timber

I’m been thinking about where a good place to store value might be, and I’ve concluded that, for me, a good instrument is wood. For luthiers and many musicians, a good instrument is wood as well, but that’s another, um, case. Hah!

Wood is something I know fairly well and can assess accurately, unlike, say, sapphires or platinum, where I would have to rely on someone else’s assessment or certification. I believe I know quality wood from just average wood, at the very least in terms of the work I do and the solid wood materials I require to construct durable goods that perform well over time. I don’t know much about other wood products, like plywood for example. It’s not something I have ever felt called upon to become savvy about, though I have noticed today’s plywood ain’t like the material from 20 years ago – it’s inferior.

I have been working wood for a good while now and one thing I’ve noticed over time: the price of solid wood never goes down, regardless of what the economy is doing. Timber availability can shrink and expand with economic expansions and contractions, but go down in price? Not something I’ve seen. Also true is the timber never gets any better in quality either – it initially comes on the market in all its glory and wonder, then, shipment by shipment, continually gets smaller and crappier and ever more expensive as the years roll by. Sometimes you can almost tell when they reached the end of the logging road. In this respect, wood is much the same as any other natural material, and conforms to the same sort of economic factors as, say, crude oil. That is, it obeys Hubbert’s Peak – a theory, but all the same a fairly persuasive one. We have peak oil already upon us according to most estimates, and I suspect that for many species of wood we have, have had, and will be having all too soon, ‘peak timber’ as well. Heck, the peak for Zitan and Huanghuali supplies, used in the finest Chinese classical furniture, was around the year 1500. Small amounts of Zitan are obtainable to this day on the commercial market, but the quality is marginal at best and the price is $100/board foot with minimum order of 100 board feet. You can rest assured that whatever scraps which show up are usually bought by Chinese companies. Huanghuali has all but disappeared.

Due to the offshore reality of the bulk of commercial furniture production these days, not only are we seeing the die-off of many furniture producers but also the wood supply yards, as it seems that the workable model is tending towards container load exports of wood to producers. It’s the same trend everywhere, leading to one giagantic box store where we will all shop and receive both medical treatment and legal advice.

Put it this way: maybe one day in the near future there won’t be the same choices for buying wood to which I have become accustomed.

Many woods hit their peak in terms of supply and quality, then inexorably work their way down the supply curve, getting poorer in quality as they do so. At first, the forest is full of huge trees and the low lying fruit, so to speak, is trimmed quickly and easily. Years later the access tracks to the timbers reach far into the forest, and logs are trucked long distances, or floated out on rivers or even yanked off hillsides by helicopter. Yet more years later, the forest is replaced by grassland and herds of farting cows, and the best we can do is scavenge the scraps from the logs that sank in that river, or perhaps from pulling old buildings apart which employed and now effectively store those better materials. Both sources can provide some great material, but at considerable difficulty and cost of extraction.

Nowadays, once a timber has reached high levels of exploitation it often finds its way onto the CITES list, and trade in that material is all but over. While locals may continue to harvest the timber, bigger trees tend to become isolated in small pockets and national parks. What then happens, the remnants in circulation in other countries is soon vacuumed up and that, more or less, is all she wrote.

Case in point is Lignum Vitae. This wood, long a staple of the shipbuilding industry, and even a strategic resource for the US military, has been exploited as a timber for 400~500 years. An extract of the tree was used as a treatment for syphilis until as recently as 1909. Further,

In the 1520s-1530s, the belief that the cure for syphilis (and the alleviation of other ailments) came from lignum-vitae created a craze (repeated a few generations later) that “drove its price to dizzy heights”, as much as 7 gold crowns per pound (lb.) of this very heavy wood (Crosby 1972, Record & Hess 1943, Swabey 1946, Lewis & Elvin-Lewis 1977).

Source for the above quote can be found here.

This wood has been pillaged for centuries, and by the late 20th century was banned for trade. So, in the 2000~2005 period one could still find stock of this wood circulating around the odd lumber dealership in North America, and I made a point of picking up a few boards here and there as I could afford them. They were expensive at that time – one 2″x12″x48″ stick (a somewhat freakish size for this species) I acquired was $700 and it took me a full year of penny-pinching to scratch together the money to buy it. Some people laughed at, or at least questioned, my ‘sanity’ (I’ll use that term loosely here folks) for spending that kind of money of a single board. Now, I didn’t buy the wood as an investment at the time – I bought it because I thought it would be perfect for any wooden mechanism I might build involving easy sliding and weight-bearing combined with extreme durability. Lignum Vitae is one of the coolest woods on the planet, and I have to admit I get a bit geeky over it.

The Chinese wheelbarrow project I’ve been working on involved some Lignum Vitae; I used it to make the axles and axle bushings. Having used up a portion of my stock on hand, I set out to look for a replacement stick, at minimum a 2″x 5″x 40″ length would suffice. Not a big stick of wood as these things go, but I could find no such stick on the open market. Suppliers that do list Lignum Vitae as a stock on hand in reality did not have any stock, and would not be getting any stock, and the best I could scratch up here and there were pen-blank size pieces. You know its getting bad when all you can find of a given species are materials sized for pens or xylophone keys.

I then located a company which has -somehow- received a permit to import small quantities of LV from Mexico, and they sell this wood primarily to US hydroelectric facilities. Lignum Vitae is, after all, nature’s best bearing material. Now, put together the terms ‘sole supplier’ and ‘captive market’, mix in a smidgeon of demand, and what do you get? Yep, a price increase. A 3″x 6″x 48″ long stick was quoted to me at an astounding $2800.00. That was the most expensive stick of wood I have ever encountered (@ $466/board ft.!), though I’m thinking it likely that it is only a glimpse of things to come. Suddenly my $700 ‘investment’ in the 2″x12″ back in 2005 looks quite rational, does it not? I like to think so at least – nothing like a little vindication from the marketplace I guess. Good to be lucky, perhaps?

So, I’ve concluded that maybe the best place for me to invest any spare capital is in something I know well, and love, and something I know to have a proven record of price/value appreciation. As far as supply dynamics go, one should never underestimate the power of logarithmic increase, and with China’s economy gaining steam, it seems to me that any investment in a quality valuable raw material is bound to be a smart one. Even more so, beyond the ‘raw material investment’ side of the coin, I have the power to turn the raw materials into added-value processed goods, which is another way of saying I will be able to offer my customers certain materials that they might not be able to find otherwise. Hopefully I will be able to do justice to the materials in what I design and make.

The above is not intended to be any form of investment advice. I’m just letting you know what I’m doing and why I think I should be doing what I’m doing. I rather hope the rest of you choose not to invest in wood so as to keep the selection decent for me for the near term at least!

Thanks for coming by the Carpentry Way. Comments most welcome.